What is Flipping

Flipping is a term frequently used with reference to property and means buying and quickly selling it off with the intention of making a profit. Flipping is a profit making exercise in which quick returns are sought by reselling a piece of real estate purchased in the very recent past. It is in keeping with the “buy and sell” profit strategy as opposed to “buy and hold”, in which property is purchased and held onto for a period of time, with returns coming both from rental income and the appreciation of the value of property over time. Flipping is a very common strategy used by investors who have funds to spare and understand the real estate market well.

Flipping Strategies

While the basic idea of flipping is buying and reselling property within a short duration of time, there are various flipping strategies used by people to make money. Some of these strategies include:

  • Flipping on “as is” basis- This means buying a property and reselling it almost immediately in the same condition as it was purchased. When the property market is booming, properties in a bad condition also get sold easily and some profits accrue within a short period of time. This type of flipping is beneficial when there is a panic sale by an owner and anyone with ready cash can buy it and resell it at a higher price to make money.
  • Flipping with upgrading or renovating- many investors in real estate buy property which is in a bad state, and renovate it, make it livable, sometimes even upgrade to provide better facilities, fixtures and fittings, and then resell it at a premium. This is not as quick as other types of flipping, but has the potential to yield higher profits.
  • Flipping with options- Many investors buy property for cash and get it cheaper due to the lump sum payment, and then resell it with options like a lease option or refinancing.

Flipping is popular all over the world, and often people flip properties even before they are fully constructed. This is more by real estate brokers with cash to spare, who keep up their flipping activities.

On the flip side, flipping is perceived to be socially destructive and believed to lead to an artificial price escalation which may not always be sustained. It also leads to an escalation in the cost of living and may force local residents to relocate to cheaper neighborhoods. Past real estate stories bear testimony to flipping bubbles which have ended with disastrous consequences. However, this type of flipping has been more speculative with only the profit motive.

Another type of flipping is the buy and fix type which is undertaken with the intention of developing better neighborhoods and localities. In such a situation a large pool of land or real estate is bought, the whole lot is improved, rebuilt or renovated and sold. This leads to an upgrading of a whole neighborhood or locality.

Flipping in small amounts is beneficial but it must not be of a scale as to lead to an adverse social or economic impact.

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